Boca Raton finance company announces end of federal investigation

Boca Raton-based Emergent Capital (NYSE: EMG) kicked off 2016 with an announcement that an ongoing probe by the U.S. Attorney Office for the District of New Hampshire has ended.

As part of the investigation, former employees resolved civil forfeiture actions for previous compensation totaling $6.5 million without admitting to the U.S. Attorney’s Office’s claims. The employees were compensated by Emergent.

The end of the investigation also brings good news for Emergent’s balance sheet, as the company no longer has indemnification obligations related to the probe.

"We are very pleased that the U.S. Attorney's Office has closed the investigation…," Phillip Goldstein, chairman of Emergent, said in a statement. "In my opinion, the elimination of this large potential liability and the diversion it caused is a real game changer."

The investigation comes from a time when Emergent went by a different name: Imperial Holdings, which traded under the ticker symbol “IFT” on the New York Stock Exchange.

The Attorney’s Office investigation began in 2011 and was focused on former company employees. Imperial Holdings entered into a non-prosecution agreement with the government in April 2012 as a result of the investigation and agreed to pay an $8 million penalty to resolve fraud allegations, according to the U.S. Attorney’s Office.

Prosecutors alleged that certain Imperial employees made or facilitated misrepresentations on applications for life insurance policies. With life insurance policies it is typical that the applicant discloses whether he or she intends to pay premiums with a finance loan. But in some instances, Imperial applications were not clear about premium financing, according to the agreement.

The U.S. Attorney’s Office alleged that the policies would likely not have been issued if the applications had more clearly disclosed intent to also seek a premium finance loan from Imperial. Imperial also agreed to terminate its premium finance business.

The U.S. Attorney’s Office sent a letter to Emergent dated Dec. 31 saying that the company was in full compliance and that it had terminated its investigation.

The Boca specialty finance company rebranded in late 2015 as part of a “major overhaul of the company over the last three years,” Emergent CEO Anthony Mitchell said in a statement at the time of the rebrand.